Transport

Local marine insurance good for industry, traders and State

insurance

Undeclared luxury cars seized at the Mombasa port in January. Local marine insurance policy could deter traders from importing undeclared goods. PHOTO | WACHIRA MWANGI

Expressions such as ‘‘killing two birds with one stone’’ are seldom used in describing the impact of any government policy on business. In fact, a regulation that serves the State’s interests well may just happen to be the same one that the industry disdains most.

Yet on a cursory review, the January 1 directive that compels importers to procure insurance locally appears to bear every hallmark of the idiom. It may be too early in the year to start assessing its impact, but the immediate result is already visible. The frequency with which service providers have launched online portals points to business confidence of unrivalled proportions.

The industry, which has been struggling to find its footing in the market, has since raised its 2017 marine premium earning outlook to Sh23 billion, up from the last recorded level of Sh2.9 billion. The higher the industry earnings, the higher the tax revenue!

The second bird in the equation is a regulatory eureka. The only reason importers previously declared value of their goods was to serve the interest of customs officials. Like any other rational businessperson, many traders may have breached the trust of revenue collectors to under-declare goods without worry in the world. After all is it not an ultimate goal to make profit by keeping every element of cost down?

Enter the new directive on insurance procurement and the dynamics suddenly change in the market. A win-win situation has been created and the trader now has an incentive to be truthful. Beyond the responsibility to pay taxes, full disclosure is an established norm in the insurance business.

The mantra being that nobody ever gets compensated for something they never insured against in the first place. Some context first. Of all the similarities between politicians and business executives, dishonesty sticks out like a sore thumb. Only that it is practically easier for citizens to tell who is dishonest among politicians than it is for them to unmask deceitful business leaders, save for the vigilance of accountants.

But going by nature of cases frequently published in daily newspapers, dishonesty may not be a preserve of leaders. It tends to underpin most of the citizens’ interaction with each and government agencies.

To be sure, what appears to be an inexplicable urge to draw a little more than the fair share from the collective pot may, in actual sense be the very fuel that lights up the entrepreneurial fire.

And so it has not been feasible for customs officials to arrest revenue leakage when all they can do is rely on information provided by traders to assess tax liability.

In the last two years, however, the national Treasury has been talking of scanning at least 50 per cent of goods shipped into the country at entry points. The lengthy process of buying scanners is yet to begin.

Only 10 per cent of goods are being scanned randomly at the port meaning 90 per cent of customs entry is based on information provided by importers.

That makes the recent directive on marine insurance a regulatory aid. Unlike in the past, importers have no option but to disclose all the material information to local insurers through the state-run TradeNet system.

And as they say, honesty is itself the best policy in insurance. Just at the touch of a button, traders will effectively be updating government records with crucial information like name of seller, type of items, and their value, both in dollars and shillings.